Labor and Material Claims on State Public Works Projects
| Publication year | 1995 |
| Pages | 2165 |
1995, September, Pg. 2165. Labor and Material Claims on State Public Works Projects
Most attorneys who practice commercial, business or real estate law are familiar with the Colorado General Mechanics Lien Statute ("GMLS"),(fn1) which provides suppliers of labor and materials certain rights in real property to which the labor and materials are supplied. This article addresses the rights of those who supply labor and materials for Colorado state public works projects and compares them with those provided under the GMLS.
The GMLS provides special remedies to suppliers of labor and material used in the construction of improvements on real property. The underlying rationale of the GMLS is to preclude unjust enrichment to the property owner.(fn2) However, the GMLS does not apply to labor performed or material furnished on or for public works, or for the establishment of a lien on public property.(fn3)
Because the GMLS is not available to suppliers of labor and material on public property, special remedies for such suppliers appear in the Colorado Contractor's Bonds and Lien on Funds Statute ("LOFS").(fn4)
The LOFS is intended to protect those who supply labor and materials for public works.(fn5) It is consistent with the clear policy underlying Colorado law that laborers and suppliers of materials in construction projects are to be paid.(fn6) The remedies under the LOFS are specifically in lieu of those provided under the GMLS.(fn7)
Section 101 of the LOFS defines "contractor" as any person, copartnership, association of persons, company or corporation who is awarded any contract for the construction, erection, repair, maintenance or improvement of any building, road, bridge, viaduct, tunnel, excavation or other public work of the state of Colorado, or for any county, city and county, municipality, school district or other political subdivision thereof. "Contractor" is referred to as "general contractor" in this article. Consistent with the philosophy of the GMLS, under the LOFS the actions of a subcontractor in purchasing labor and materials are imputed to the general contractor.(fn8)
The LOFS provides two separate avenues of relief for a supplier: (1) action on bond under §§ 105 and 106, and (2) action on retainage under § 107.
LOFS § 105(fn9) provides that the general contractor is required to execute a payment bond with respect to any public works contract involving more than $50,000 with any county, municipality or school district. Notwithstanding the $50,000 qualification, the public body may, in its discretion, require a bond for contracts less than $50,000.
The bond must provide that payments be made on "all amounts lawfully due" to suppliers of labor and materials "in the prosecution of the work provided for in such contract." This is broader than the rights provided under the GMLS, which limits a supplier's claim to the "value" of labor and materials incorporated in the improvements.(fn10) The standard under § 105 is not whether the labor and materials entered into the work, but rather whether they were necessary for the job the supplier had to do.(fn11)
LOFS § 106(fn12) requires the general contractor to execute a performance and payment bond for not less than one-half the total amount payable with respect to public works projects more than $50,000 for the state of Colorado, or any county, municipality, school district or other political subdivision thereof. The public entity is expressly prohibited from paying the general contractor unless and until the bond is filed.
LOFS §§ 105 and 106 are somewhat difficult to reconcile because they each address nearly identical issues but are worded quite differently. These differences may result from different enactment dates. Section 105 (payment bond) was enacted in 1915. Section 106...
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